The Aristophil bubble: a controversial investment scheme

Breton, Sade, Aragon… a manuscript collection at the heart of a financial scandal. The liquidation of the Aristophil company has raised the issue of fraud in the art world. How can we decode the financial operation?

On 20 December 2017, the inaugural sale of Aristophil’s collections took place at Hôtel Drouot. Among these collections were major works by renowned authors, such as “The 120 Days of Sodom, or the School of Libertinage” by the Marquis de Sade, or “The Manifesto of Surrealism” by André Breton, as well as manuscripts and letters written by Aragon, Kessel, Gauguin, Proust, Monet, Char, amongst others.

Liquidation was at last resort for this company to enable its 18,000 co-owners, mostly individuals, to obtain a partial reimbursement of their share of the €850 million investment.

The investment was attractive to say the least: investing and capitalising in ancient books and manuscripts with a return of 8 to 9% per year, within the context of co-ownership, and with the prospect of a comfortable capital gain when reselling in the medium term.

Unfortunately, on 16 February 2015, the bubble burst with Aristophil going into liquidation and the sale at auction of the manuscript collection.

The operation revealed during the insolvency proceedings is reminiscent of the Ponzi scheme; a fraudulent system, used in particular by Bernard Madoff, based primarily on using capital raised through the acquisition of new investors to generate returns for old investors and sustain the illusion of the operation’s high profitability.

What recourse remains for the victims?

Of course, brokers may have presented Aristophil’s offering as a safe and profitable investment, meaning that their public liability – and the protection offered by their insurance company – could be sought.

Similarly, companies that invested could also check whether this situation falls within the scope of their insurance against fraud. However, chances are that they are only insured against the events and operating methods mentioned in their policies.

Especially since they remain owners of undivided shares of ancient manuscripts, whose prices have certainly been overvalued.

Laurent Michel, Finance Loss Adjuster